Insurtech funding rebounded in the second quarter after a COVID-19-induced slowdown in the first months of 2020, according to a new report from Willis Towers Watson.
According to the firm’s Quarterly InsurTech Briefing, US$1.56 billion was raised by insurtech firms in the second quarter, a 71% spike from Q1. The rise was driven in part by late-stage investments, including four “mega-rounds” in excess of US$100 billion.
At 74, the deal count was down 23% from the first quarter, but many individual rounds were larger as investors turned away from seed and angel deals in favour of supporting more mature ventures, Willis Towers Watson said. P&C sector investments accounted for 68% of funding, while L&H sector investment rose 17 points to 32% as the COVID-19 crisis continued to increase the value of technology in the segment, particularly in telehealth. Notable transactions included the initial public offering of Lemonade and the acquisition of two incumbent insurance companies by insurtechs Hippo and Buckle.
“Deals were struck in a record-breaking 25 countries, including newcomers such as Taiwan, Croatia, and Hungary,” Willis Towers Watson said. Seed and Series A financing sank to a record low of just 42% of deals. Series A deals were flat, while Series C deals rose to 11% of deals from 6% the previous quarter. Distribution-focused start-ups posted an 11-point rise in deal share, while B2B companies saw their share fall by nine points. New reinsurer partnerships hit a record high of 34 deals, up four from Q1.
“While insurtech investment clearly rebounded in Q2, and the trend towards greater commitments to later-stage fundraisings continues, we should be cautious not to read too much into the greater state of the global insurtech market based on this quarter alone,” said Dr. Andrew Johnston, global head of insurtech at Willis Re. “In the short term, investment confidence will test the status quo, especially for highly leveraged insurtechs. Similarly, certain risks and their associated vectors have changed fundamentally, and so the impact of that is yet to be truly felt. It is quite possible that we will observe a general slowing down of insurtech activity as a result.”